Today, record shops are faced with a very real problem. Many of the large record shops are having to decide just which disks to keep in stock. The Indies and Majors are annually producing over 33,000 titles, roughly 100,000 CD's every 3 years. Forget the small record shops for the moment. Just realize that only the very large record shops may be able to provide shelf space for perhaps 200,000 disks. Some music genres may thus suffer.

Several new factors now have to be considered. The exploding Internet is a huge consideration. Already, 300 million people are online daily, and the number is growing faster than anyone can count. This is just the beginning of something that IBM has dubbed 'e-commerce'. Digital Music is one of the products that can be delivered directly to the end consumer via computer, and the CEMA (Consumer Electronics Manufacturers Association) is now forecasting that sales of computers with both conventional audio playing CD and DVD drives will soon triple and quadruple.

The year 1998 was a 'crossover' benchmark for the telephone companies. They have begun to transmit more digital data than analog voice information. Andy Grove, Intel Corporation CEO, has referred to this situation as a "strategic inflection point". By this, he means that a peculiar moment in history has occurred when a paradigm shifts and conventional wisdom no longer holds true. This moment may have arrived for the music industry.

Presently, various music societies, such as ASCAP and BMI in the USA, protect and compensate musical copyright holders through the use of various licensing fees. The original intent was to collect fees only from commercial users of music, such as radio shows, nightclubs, Motion Picture studios, Elevator and office background music, restaurant jukeboxes, and others. Essentially, this is a problem in counting -- the number of air plays, or number of listeners, etc. But this 'counting' will NOT be an 'online' problem.

A brand new reality is now in place. Computer information servers can easily track the reception of finite music quantities. In other words, the sales of CDs or even the downloading of music files is easily tracked, - and just as easily payable via online credit transactions.

It is now possible to envision a future where micropayment systems will exist, crediting an artist's account every time a musical CD/file is purchased and/or downloaded to an end user or listener. In fact, bootlegging, an issue that has for years plagued the music industry, will now become a big 'plus' for the industry. Computer transfer of any music can automatically trigger a credit to a source copyright holder's account. Such a system of "Direct Internet Micropayments" for digital music may very well be the single Iargest change of doing business in the music industry's long history. Not only could it transform the pricing of music, but it could very well alter the traditional relationship between an artist; the contracting record label; and the consumer.

There may be new considerations such as "Value Changes" and even "Virtual Clubs or Tickets". "Scalable" pricing strategies are one form of 'Value Changes' that will proliferate. Unknown artists may offer to promote their work at one price, hoping to gain public acceptance, while the works of better known artists may be offered at higher levels. Both Labels and Artists may form new types of marketing and sales promotions, - perhaps independently or perhaps in partnership with each other. There are tremendous savings in not having to physically produce, package, and distribute CDs to stores. This fact alone may drastically alter music business economics. Another factor is that unknown artists will be able to offer their own works directly to the Internet public, thus bypassing the traditional labels and their distribution systems.

Some people are now thinking in terms of a "Virtual Ticket" or "Virtual Club". This is still another interesting marketing ploy. "Cybercasting" quality is not yet the equal of high quality Television, but it is rapidly improving and may soon exceed current TV standards. Consider also that the 'walls' of a "Cyber Club" are digitally transparent. A 17 piece big band, say Bob January's Satin Swing Orchestra, will only be playing to a few hundred of their die-hard local area fans, but they will still be heard by 25 folks in New Orleans, 12 in Paris, 37 in London, 24 in Tel Aviv, and so forth, for a grand total of several thousands, - clear around the world. Micropayments from attendence at such 'Virtual Clubs' could be quite rewarding to the artists while still providing great entertainment. (Local Jazz 'Festivals' - Newport, New York, Toronto, etc., - could become 'World' Jazz Fests.) Additionally, just as in 'real' clubs, the patrons will be able to purchase band memorabilia such as T-shirts, CD's and even archived previous concerts, - all with just a mouse click.

A 'Virtual Club' will never be a substitute for live performances. But the online concerts can help an artist to develop an audience and some new fans. And, there is an additional incentive. While some forms of music may have fairly limited audiences, -for example ethnic folk music, experimental jazz, etc., - on a local level, the audience on a 'world scale' may very well make the music available where it would not otherwise he heard, and still make the performance monetarily rewarding to the artists involved.

In time, the Internet is going to have a profound effect on all aspects of music business economics.